QUIZ NO.

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(Obligations of the Vendor – General Provisions [Art. 1495-1496] and Delivery of the Thing
Sold [Art. 1497-1544]); (Conditions and Warranties [Art. 1545-1581]); (Obligation of the
Vendee [Art. 1582-1593] and Actions for Breach of Contract of Sale of Goods [Art. 1594-1599])
to include Recto Law: sale of movables on installment (Articles 1484 to 1486, Civil Code) and
Maceda Law: sale of immovable on installment (R.A. No. 6552); (Extinguishment of Sale [Art.
1600-1623]; Assignment of Credits and Other Incorporeal Rights [Art. 1624-1635]
March 10, 2018

I
May delivery be made even if there are illegal occupants on the property subject of the contract
of sale? Explain. (5%)

Answer: Albano, p. 573; Power Commercial and Industrial Corporation vs. CA, 274 SCRA 597

Yes. Notwithstanding the presence of illegal occupants on the subject property, transfer of
ownership by symbolic delivery can still be effected through the execution of the deed of
conveyance (Article 1498, NCC). It is well-settled rule that key word is control, not possession,
of the subject property. The rule is true especially the deed of conveyance does not stipulate or
infer that the buyers could not exercise control over said deed.

II
X is the owner of a parcel of land. He sold it to Y who did not register the deed of sale. Later on,
X mortgaged the same land to Z. Between the two contracts, which shall prevail? Explain. (5%)

Answer: Albano, p. 582; Reyes vs. De Leon, L-2231, June 16, 1967; Fabian vs. Smith Bell, 36
Phil. 510

An unrecorded sale shall prevail because the owner has already parted with his property at the
time of the mortgage, and the mortgage is always subject to the better rights of third parties.

III
Spouses Victoriano and Crisanta Dela Rosa were the registered owners of a parcel of land. On
May 4, 1931, Victoriano sold ½ of the land to Juliana Salazar who constructed a house. The
document was not registered. On June 16, 1961, the children of the spouses sold the entire land
to Nuguid. It was registered on March 10, 1964 and a title was issued. Between the first and the
second buyer, who has a better right? Why? (5%)

Answer: Albano, p. 583; Alzona vs. Capunitan, 4 SCRA 450; Tañedo, et. al. vs. CA, et. al., G.R.
No. 104482, Jan. 22, 1996; 67 SCAD 57; Sps. Nuguid vs. CA, G.R. No. 77423, March 13, 1989;
De los Santos vs. CA, et. al., G.R. No. 111935, September 5, 1997, 86 SCAD 671

The ownership should belong to the vendee who, in good faith, first recorded it in the Registry of
Property. Although the second sale was made by the heirs of Dela Rosa, the said heirs are
deemed the continuation of the personality of the decedent. Hence, the second buyer is the
owner.

Petitioner was a purchaser in good faith and for value. The title was free from any annotation or
encumbrance. If the property sold is a registered land, the purchaser in good faith has a right to
rely on the certificate of the title and is under no duty to go behind it to look for flaws, for
previous registration is required to be coupled with good faith.

IV
X, while living in Manila, wrote Y, who is residing in Bicol, informing him that he would redeem
the parcel of land he sold with right to repurchase. Such letter was sent before the expiration of
the period. Is this sufficient to preserve X’s right? Why? (5%)

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Answer: Albano, pp. 602-603; Celsa Puncia Anchuelo vs. IAC, Jan. 29, 1987

No. A formal offer to redeem is necessary. It is not sufficient for the vendor to initiate or state to
the vendee that the former desires to redeem the thing sold, he must immediately offer to pay the
price. The mere sending of letters by the vendor expressing his desire to repurchase the property
without an accompanying tender of the redemption price falls short of the requirements of the
law. If he fails to properly exercise his right, then, it is lost and the same can no longer be revived
by filing an action to compel redemption after the lapse of the period.

V
A contract of sale over a parcel of land was entered into by and between the parties for only
P80,000.00. It was being questioned, as the intention was one of equitable mortgage. It was
found out that the payments amounted to P120,000.00, but evidence was shown that the amount
of P80,000.00 was placed in the contract to reduce the documentary stamps, transfer tax, etc. Is
the conveyance one of sale or merely a security for the payment of a loan? (5%)

Answer: Albano, p. 607; Vda. de Alvarez vs. CA, et. al., G.R. No. 110970, March 16, 1994, 49
SCAD 663

It is one of sale. The presumption of equitable mortgage will apply only if it is clearly shown that
the consideration was unusually inadequate such that the mind revolts at it and such that a
reasonable man would neither directly or indirectly be likely to consent it.

VI
The owner of a real property offered the sale to the adjoining owners and one of them agreed to
the sale to take place after the harvest season. But he later sold the same to another. The heirs of
one of the adjoining owners learned about the sale a day after it sold and conveyed their intention
to redeem the property but the seller answered, saying there was already a contract of sale
executed with the buyer and that they never tendered the redemption amount. A complaint for
legal redemption was filed but it was opposed on the ground that he complied with the
requirement of notice under Article 1623, NCC, but they failed to exercise the right of
redemption. There was likewise no need to comply with the written notice requirement since
they already knew of the sale. Is the contention correct? Why? (5%)

Answer: Albano, p. 614; Conejero vs. CA, 123 Phil. 605 (1966); Barcellano vs. Banas, et. al.,
G.R. No. 165287, September 14, 2011; Verdad vs. CA, 326 Phil. 601 (1996); Guillen vs. CA,
G.R. No. 159755, June 18, 2009, 589 SCRA 399

Mere knowledge of the sale, acquired in some other manner by the redemption, does not satisfy
the statute. It is intended to remove all uncertainty as to the sale, its terms and its validity, and to
quiet any doubts that the alienation is not definitive. The statute not having provided for any
alternative, the method of notification prescribed remains exclusive.

VII
X, Y, and Z are co-owners of a parcel of land. X sold his share to A. When Y sold his share, X
wanted to exercise the right of redemption but the buyer, B, refused. Is the refusal proper? Why?
(5%)

Answer: Albano, p. 620; De la Cruz vs. Marcelino, 84 Phil. 709; Sps. Abalos, et. al., vs. CA, et.
al., G.R. No. 99843, June 22, 1993, 42 SCAD 569

Yes. He cannot exercise the right of redemption because he has already ceased to be a member of
the co-ownership. In fact, he had relinquished his status as co-owner when he sold his share, for
the origin of his right of redemption is his being a co-owner.

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 VIII
There was a complaint for sum of money filed by the Serfinos against the spouses Cortez. To
settle the case, they executed a compromise agreement and the latter bound themselves “to pay in
full the judgment debt out of her retirement benefits.” But the retirement benefits were deposited
with the account of their daughter at FEBTC and subsequently withdrawn. Spouses Serfino claim
ownership of the deposit by virtue of assignment of credit, and they posit that FEBTC was duty
bound to protect their right by preventing the withdrawal of the deposit since the bank had been
notified of the assignment and of their claim. Is the contention correct? Explain. (5%)

Answer: Albano, p. 624; Serfino vs. FEBTC, et. al., G.R. No. 171845, October 10, 2012

No. There was assignment of credit. The terms of the compromise judgment did not convey an
intent to equate the assignment of Magdalena’s retirement benefits (the credit) as the equivalent
of the payment of the debt due the Spouses Serfino (the obligation). There was actually no
assignment of credit; if at all, the compromise judgment merely identified the fund form which
payment for the judgment debt would be sourced.

IX
There was a contract to sell over a subdivision property. Later on, the buyer demolished the
house and constructed another one. The buyer paid only at least two years of installment.
Thereafter, he failed to pay the succeeding amortizations. Hence, the seller sent a notarized
notice of delinquency and cancellation of the contract. Then, it filed a complaint for ejectment.
But it was dismissed due to the finding that the title was already transferred to the buyer. Later
on, it filed a complaint for Cancellation of Title and Reconveyance with Damages. The trial court
declared the title cancelled but ordered the refund of the total monthly installments and the value
of the house less the cost of the original house. Is the ruling ordering the refund of the total
amount of installments correct? Explain. (5%)

Answer: Albano, pp. 624-625; Communities Cagayan, Inc. vs. Sps. Nanol, et. al., G.R. No.
176791, November 14, 2012

The Supreme Court ruled that it should be only to the extent of 50%. Under the Maceda Law, the
actual cancellation of a contract to sell takes place after 30 days from receipt by the buyer of the
notarized notice of cancellation and upon full payment of the cash surrender value to the buyer.
In other words, before a contract to sell can be validly and effectively cancelled, the seller has (1)
to send a notarized notice of cancellation to the buyer and (2) to refund the cash surrender value.
Until and unless the seller complies with these twin mandatory requirements, the contract to sell
between the parties remains valid and subsisting.

In this case, petitioner complied only with the first condition by sending a notarized notice of
cancellation to the respondent-spouses. It failed, however, to refund the cash surrender value to
the respondent-spouses. Thus, the Contract to Sell remains valid and subsisting and supposedly,
respondent-spouses have the right to continue occupying the subject property.

Since respondent spouses paid at least two years of installment, they are entitled to receive the
cash surrender value of the payments they had made which, under Section 3(b) of the Maceda
Law, is equivalent to 50% of the total payments made.

X
Spouses Macario and Bonifacio Dakila entered into a contract to sell with Honorio Cruz over a
parcel of industrial land in Valenzuela, Bulacan for a price of P3,500,000.00. The spouses would
give a down payment of P500,000.00 upon the signing of the contract, while the balance would
be paid for the next three (3) consecutive months in the amount of P1,000,000.00 per month. The
spouses paid the first two (2) installments but not the last installment. After one (1) year, the
spouses offered to pay the unpaid balance which Honorio refused to accept. The spouses filed a
complaint for specific performance against Honorio invoking the application of the Maceda Law.
If you are the judge, how will you decide the case? (5%)

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Answer: Ulep, p. 243; Bar Problem (2014)

I will dismiss the complaint. The invocation of the Maceda Law by the spouses is misplaced.
Sec. 3 of R.A. 6552 (Maceda Law) provides that it is applicable in all transaction or contracts
involving the sale or financing of real estate on installment payments, including residential
condominium apartments but excluding industrial lots, commercial buildings and sales to
tenants. Since the subject of the case is an industrial land, Maceda Law is not applicable.

XI
On June 15, 1995, Jesus sold a parcel of registered land to Jaime. On June 30, 1995, he sold the
same land to Jose. Who has a better right if:

a) The first sale is registered ahead of the second sale, with knowledge of the latter. Why?
(3%)
b) The second sale is registered ahead of the first sale, with knowledge of the latter. Why?
(2%)

Answer: Ulep, p. 179; Bar Problem (2001)

a) The first buyer has a better right if his sale was first to be registered, even though the first
buyer knew of the second sale. The fact that he knew of the second sale at the time of his
registration does not make him as acting in bad faith because the sale to him was ahead in
time, hence, has a priority in right. What creates bad faith in the case of double sale of
land knowledge of a previous sale.
b) The first buyer is still to be preferred, where the second sale is registered ahead of the
first sale but with knowledge of the latter. This is because the second buyer, who at the
time he registered his sale knew that the property had already been sold to someone else,
acted in bad faith. (Article 1544, CC) (Answer by UP Law Center).

XII
Miguel, Carlos, and Lino are neighbors. Miguel owned a piece of registered land which both
Carlos and Lino wanted to buy. Miguel sold the land to Carlos. The sale was not registered upon
the request of Miguel. Later on, the same property was sold by Miguel to Lino. Miguel told
Carlos about the second sale. Carlos immediately tried to see Lino to discuss the matter and
inform him of the previous sale to him (Carlos) of the same property but Lino refused to see
Carlos. Thereupon, Carlos annotated in the Registry of Property his adverse claim on the
property. A week later, Lino registered the sale in his favor and had a new transfer certificate of
title issued in his name. However, the adverse claim of Carlos was duly annotated in the title.
Notwithstanding, Lino took possession of the property and built a small bungalow thereon.

a) Who is the rightful owner of the property? Explain. (3%)

b) To whom would the bungalow built by Lino on the property belong? (2%)

Answer: Ulep, pp. 182-183; Bar Problem (1987)

a) In double sales, under Article 1544, the land sold belongs to the first registrant in good
faith. If none, it belongs to the first possessor in good faith. If none, it belongs to the
person with the oldest title, provided there is good faith. Carlos, who has the oldest title,
is therefore the rightful owner of the property, because there was no registration in good
faith by Lino.
b) The bungalow built by Lino belongs to Carlos. Lino is a builder in bad faith. Art. 449
provides that he who builds in bad faith on the land of another loses what is built without
right of indemnity. (Answer by UP Law Center).

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 XIII
A and B sold to C an unregistered lot; the deed was not registered, but C took possession. Later,
D obtained a judgment against A and B and the lot in C’s possession was levied upon and sold by
Sheriff to D. The Sheriff’s sale was registered. All the parties acted in good faith. Who has better
rights to the land? Give reasons. (5%)

Answer: Ulep, pp. 183-184; Bar Problem (1977)

C has better rights to the land. It is now well-settled that the rule on double sales in Art. 1544 of
the Civil Code applies only to lands covered by a Torrens title. Where the land is not registered
under Act No. 496, the rule is different. The reason is that the purchase of unregistered land at a
sheriff’s sale only steps into the shoes of the judgment debtor, and merely acquires the latter’s
interest in the property as of the time the property was levied upon, as provided in Sec. 35 of
Rule 39 of the Rules of Court. (Answer by UP Law Center).

XIV
A bought on installment a residential subdivision lot, but after the 5th year, he was unable to make
further payments. Can the developer cancel the sale unilaterally, or must he go to court to obtain
rescission? Is A entitled to any refund? (5%)

Answer: Ulep, p. 245; Bar Problem (1977)

Yes, the developer can cancel the sale unilaterally. He need not go to court in order to obtain
rescission, provided that the actual cancellation of the contract shall take place after thirty days
from receipt by the buyer of the notice of cancellation or the demand for rescission of the
contract by a notarial act and upon full payment of the cash surrender value to the buyer. (Rep.
Act No. 6552, Sec. 3(b)). (Answer by UP Law Center).

XV
C bought from A cinematographic equipment for P15,000. He made a down payment of P10,000,
promising to pay the balance in four installments. After payment of the first installment, B
informed C that since he is a co-owner of the equipment sold, payments to A must be suspended.
When A sought to collect from C, the latter refused to pay on account of B’s claim. Subsequently,
B brought an action against both A and C for his share in the price of the equipment. A and B,
however, arrived at a compromise agreement by virtue of which the former recognized the latter
as co-owner of the equipment. After this agreement, A brought an action against C for the unpaid
balance. Is C liable for the payment of legal interest considering that he was justified in
suspending payment? (5%)

Answer: Jurado, p. 841; Bareng vs. CA, 107 Phil. 641

The right of a vendee to suspend payment of the price of the thing sold in the face of any danger
that he might be disturbed in its possession or ownership is conferred by Art. 1590 of the Civil
Code, such suspension to continue until the vendor has caused the danger or disturbance to
cease, unless the latter gives security for the return of the price in a proper case, or it has been
stipulated that, notwithstanding any such contingency, the vendee shall be bound to make the
payment. This is, therefore, no question that C had the right to suspend payment from the time he
was informed by B of the latter’s claim of ownership thereof. Nevertheless, said right ended as
soon as the vendor had caused the disturbance or danger to cease. In this case, the disturbance
ceased when A reached a compromise agreement with B. It is clear, therefore, that C was in
default from the date of the filing of the complaint by A, and under Art. 2209 of the Civil Code,
he must pay legal interest from the said date.

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 XVI
A sold a parcel of land to B for P5,000 with right of repurchase. It was expressly stipulated in the
contract of sale that A shall have the right to redeem the property “at any time when he has
money.” What is the period of redemption in such a case? Reason. (5%)

Answer: Jurado, pp. 845-846; Bandong vs. Austria, 31 Phil. 479; Alojado vs. Lim, 51 Phil. 339;
Soriano vs. Abalos, 47 Off. Gaz. 168; Corcega vs. Brosas, CA, Off. Gaz. 3411

According to several decisions rendered by the Supreme Court, the phrase “at any time” found in
the deed of sale, although indefinite, expresses an agreement as to the period within which the
right of redemption of the thing sold was reserved by the vendor himself. Consequently, the case
is governed by the second paragraph of Art. 1606 of the Civil Code, and not by the first
paragraph. The period of redemption is, therefore, ten years counted from the date of the
execution of the contract.

XVII
S sold sugar to B. The sugar was delivered by S into B’s warehouse, leaving it entirely subject to
his control. B, however, failed to make payment after completion of delivery as per agreement.
C, a bank, took possession of the sugar pursuant to a contract of pledge entered into between the
bank and B to secure the latter’s indebtedness of P20,000. Subsequently, B became insolvent. Is
S still the owner of the sugar as to entitle him to recovery of its possession? (5%)

Answer: De Leon, p. 218; Ocejo Perez & Co. vs. International Bank, 37 Phil. 631 [1918]

No. When S delivered the sugar into B’s warehouse, leaving it entirely subject to his control, it is
difficult to see how S could have divested himself more completely of the possession of the
sugar, or how he could have placed it more completely under the control of the buyer. The fact
that the price has not yet been paid, in the absence of stipulation, was not, nor could it be an
obstacle to the acquisition of ownership by B, without prejudice, of course, to the right of S to
claim payment of the sum due.

XVIII
S sold to B a tractor, payable at P5,000 upon delivery and the balance of P7,000 within 60 days.
B failed to take delivery of the tractor and pay the purchase price. S was forced to sell the same
to third person for only P10,000. Is B liable for the difference of P2,000? (5%)

Answer: De Leon, p. 316; Katigbak vs. CA, 4 SCRA 243 [1962], citing Hanlon vs. Hausserman

Yes. In a contract of sale which is executory as to both parties, the vendor is entitled to resell
goods if the purchaser fails to take delivery and pay the purchase price. If he is obliged to sell for
less than the contract price, he holds the buyer for the difference; if he sells for as much as or
more than the contract price, the breach of contract by the original buyer in damnum absque
injuria.

There is no need of an action for rescission to authorize the vendor, who is still in possession, to
dispose of the property where the buyer fails to pay the price and take delivery.

XIX
On January 2, 1980, A and B entered into a contract whereby A sold to B a parcel of land for and
in consideration of P10,000.00. A reserving to himself the right to repurchase the same. Because
they were friends, no period was agreed upon for the repurchase of the property.
a) Until when must A exercise his right of repurchase? (3%)
b) If A fails to redeem the property within the allowable period, what would you advise B to
do for his better protection? (2%)

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Answer: Ulep, pp. 318-319; Bar Problem (1993)

a) A can exercise his right to repurchase within four (4) years from the date of the contract
(Art. 1606, Civil Code).
b) I would advise B to file an action for consolidation of title and obtain a judicial
consolidation which must be recorded in the Registry of Property (Art. 1607, Civil Code).
(Answer by UP Law Center).

XX
X and Y entered into a contract of sale with right to repurchase over a parcel of land. Despite the
sale, X, the seller, retained possession. The contract also provides for a monthly escalation of the
repurchase price. What is the nature of the contract? Why? (5%)

Answer: Albano, p. 606; Bundalian vs. CA, 129 SCRA 645

It is an equitable mortgage. In Bundalian vs. CA, 129 SCRA 645, it was said that an equitable
mortgage exists where vendors are given the right to possess property pending redemption. In the
same case, the SC said that monthly escalation of repurchase price indicates a loan transaction
secured by an equitable mortgage.

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